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Thelma McCoy v. USA

Summarizing by Craig Geno

Abdul-Rahim v. LaBarge (In re Abdul-Rahim)

Citation:
Abdul-Rahim v. LaBarge (In re Abdul-Rahim), Case No. 12-3448 (8th Cir. 2013)
Tag(s):
Ruling:
Eighth Circuit affirmed the BAP's decision which had affirmed the bankruptcy court's ruling that the holding of In re Benn, 491 F.3d 811 (8th Cir. 2007), compelled the conclusion that the debtor's unliquidated personal injury claim may not be exempted from their bankruptcy schedules.
Procedural context:
The case was on appeal from the BAP's decision affirming the bankruptcy court's ruling that the debtor's unliquidated personal injury claim may not be exempted from their bankruptcy schedules.
Facts:
In the debtor's chapter 13 schedules, they claimed as exempt an unliquidated personal injury claim associated with an automobile accident. The trustee objected to the exemption. The court observed that Missouri had opted out of the bankruptcy code's exemptions under Section 522. Thus, the debtor could only claim exemptions based upon federal or state exemptions other than those found in Section 522. The court noted that there is no specific Missouri statute that specifies that an unliquidated tort claim can be exempted from the bankruptcy estate. Section 513.427 RSMo, Missouri's "opt-out" statute, provides that Missouri debtors "shall be permitted to exempt from property of the [bankruptcy] estate any property that is exempt from attachment and execution under the law of the state of Missouri." A separate Missouri statute, Section 513.430 RSMo, lists the kinds of property that are exempt from attachment and accordingly may be exempted from the bankruptcy estate. The proceeds of personal injury or tort claims, unliquidated or otherwise, are not listed in Section 513.430, nor are they listed as exempt in any other Missouri or federal statute. The trustee cited the 8th Circuit's decision In re Benn, 491 F.3d 811 (8th Cir. 2007) as authority for the objection to the claimed exemption. The debtors argued that the holding of In re Benn was limited and had been improperly expanded by the Missouri bankruptcy courts and the Eighth Circuit bankruptcy appellate panels. In In re Benn, the debtors, Missouri citizens, attempted to exempt their state tax refund from their bankruptcy estate, arguing that in addition to serving as the state's "opt-out" provision, Section 513.427 R.S.Mo, also defined additional forms of property that may be exempt. The debtors pointed to the language in Section 513.427 which states that debtors are entitled to exempt from the bankruptcy estate "any property that is exempt from attachment and execution under the law of the state of Missouri." The Eighth Circuit rejected the debtor's contention that Section 513.427 was an exemption statute in addition to an opt-out statute, holding that the meaning of the "law of the state of Missouri" was that Missouri debtors may exempt property only "where another Missouri statute specifies that certain property is exempt." Under the reasoning of In re Benn, a Missouri debtor may only exempt property from the bankruptcy estate if Section 513.430 RSMo or some other Missouri legislative pronouncement provides for exemption from bankruptcy. Nevertheless, the debtors argued that In re Benn's holding is narrow and stands only for the proposition that Section 513.427 RSMo does not create an exemption for tax refunds, nor does any other Missouri or federal statute. The primary authority cited by the debtors in support of their argument that unliquidated personal injury claims may be exempted was In re Mitchell, 73 B.R. 93 (Bankr.E.D.Mo. 1987). The Mitchell court specifically held that the language of Section 513.427 RSMo "permits Missouri residents to claim exemptions created by statutory and constitutional law as well as common law." The Mitchell court explained such claims should be exempt from the bankruptcy estate because they are contingent, uncertain, and unattachable and therefore fall within the language of Section 513.427 RSMo. The Eighth Circuit noted however that the substance of the reasoning in Mitchell - that Section 513.427 RSMo contains exemptions in addition to the opt-out language - was overruled by In re Benn. The court also acknowledged the Trustee's point that the Missouri legislature has apparently declined the opportunity to amend its exemption statute, Section 513.430 RSMo., to add unliquidated personal injury claims, even in light of the numerous Missouri bankruptcy court decisions precluding such claim from exemption. Unless In re Benn is overruled en banc or by the Supreme Court, it remains binding precedent, and is directly applicable to the issues in this case.
Judge(s):
Wollman, Beam, and Murphy

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